CA Intermediate · Cost and Management Accounting · Overheads - Absorption Costing Method
Kaveri Plastics absorbs factory overhead at 150% of direct wages. For a job, direct materials were Rs 40,000 and direct wages Rs 20,000. Administration overhead is 10% of factory cost. What is the total cost of the job?
The total cost of the job is Rs 99,000. Factory overhead is Rs 30,000, giving factory cost of Rs 90,000, and administration overhead at 10% of factory cost adds Rs 9,000.
- ARs 99,000Correct
- BRs 1,00,000
- CRs 1,10,000
- DRs 90,000
Explanation
Factory overhead = 150% x 20,000 = 30,000. Factory cost = 40,000 + 20,000 + 30,000 = 90,000. Administration overhead = 10% x 90,000 = 9,000. Total cost = 99,000. Rs 1,00,000 would be wrong because it adds 10% on the wrong base.
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